Qualifying Your Clients for Commercial Finance Transactions
Author: Lauran BonaparteYour new business has finally opened its doors. You\'ve secured lenders, pitched your services to colleagues and now your phone is ringing!
In order to keep this momentum going, you have to be able to qualify your clients, quickly. Here are the basic items that ALL lenders want to see from their applicants. Make this your checklist when qualifying your new client.
· An Executive Summary
The executive summary should be the first section of a business plan. We review over 700 projects per year and in my opinion, the most important part of the loan package is executive summary. When developed correctly, a lender can make a decision within minutes if they want to pursue financing. The summary should be no more than two pages, less is preferable. It should contain the name of the business or project, the objectives of the business or project, how the company will be utilizing their influx of new capital and snippets of the management team. If this is not a start up project, then listing the successes of the business will be helpful. If it is a start up project then lenders want to know what\'s so special (disruptive) about your concept.
· Financials of the business
If the business is a start up, be prepared to ask your client for at least three years of financial projections (this should be included in the business plan), personal tax returns for the past three years and their credit score. If you are financing an existing business, you\'ll want to request the past three years business tax returns, the past three years personal tax returns of all owners (25ownership or more) of the business, the Personal Financial Statements from each owner and three years of financial projections. While these items are mandatory, I also request quarterly P&L statements from the previous year. I like to see if there are any dips or inconsistencies in their sales figures.
· The business plan
Not all lenders want to review a full business plan; however, it\'s a good idea to make sure your client has one in case it is requested. The business plan is a sales document. It should be designed to attract investors while providing a road map for the company\'s success. All good business plans should contain the following information: an executive summary, a marketing plan, industry analysis, a description of the key players in the management team, your business model, the competition and the financial history and projections of the company.
· Use of funds
This part can be a bit tricky. While your client will inevitably ask for the moon and stars, their numbers have to make sense. Also keep in mind that unless a client has a specific acquisition need, their use of funds should reflect scalability. For example, if your client requests a $30M loan to build factories, lenders will want to see that he can build a factory at the $5M level, a $10M level, $15M level and so on. Also, be prepared to educate your client on how lenders review use of funds requests against a company\'s current financials. Very few, if any, start ups would receive a $10M infusion of capital when their sales were zero the previous year. The numbers have to make sense. Your client must be prepared to justify the amount requested and describe how the debt fits into an overall plan for financing and developing the business. Short-term loans for seasonal inventory or for financing receivables are easier to obtain than long-term loans, especially for early-stage businesses. Lenders ALWAYS want to know when and how they will get their money back. Make sure your client can answer this question.
· The Management Team
Unless your lenders specifically state that they are seeking to lend money to novices who create start ups, don\'t take on client who cannot show a track record of successes. Lenders pay particular attention to firms with seasoned management teams who are backed by investors with whom they have had prior relationships and whose judgment they trust. If your client is not a seasoned business owner or developer, make sure there is a partner in place who can show a successful history.
The more information you have on your client and their business, the easier it will be to push the necessary paperwork to a lender. As a side note, having been in the commercial finance industry for several years, I can tell you first hand that when a client is difficult in the beginning, they will be difficult throughout the process. Save yourself from foreseeable headaches by not taking on clients who are not responsive and easy to work with.
Article Source: http://www.articlesbase.com/networking-articles/qualifying-your-clients-for-commercial-finance-transactions-6628223.html
About the AuthorWith more fifteen years of operational, sales and management experience, Lauran Bonaparte has developed a sharp eye for how businesses can obtain the necessary financing for their commercial projects. Her relationships with private lenders and private equity firms afford her the ability to advise clients on the most efficient source for their capital needs. As a serial entrepreneur, her focus has been in real estate (both residential and commercial) with a new look towards large scale development projects in the US and abroad.
Prior to establishing Lauton Foxton Capital Group, Lauran established a successful property management firm and global advisory firm which enabled her clients access to private capital in the US and abroad.
Before re-branding the Lauton name, Lauran spent eight years at the oldest, most notable professional theater company in the world, The Shubert Organization. She began her career as Shubert\'s Group Sales Manager increasing their sales division income three-fold within a two year period. After several promotions during her tenure, she left the organization in 2006 to embark on her entrepreneurship full time.
Personally, Lauran is an avid reader and swimmer. She donates her time to such notable organizations as The American Cancer Society and The New Jersey Food Bank.
Ms. Bonaparte resides in New Jersey with her husband and her two children.
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